The Reality of Legitimacy Alternatives of financial Derivatives in the Light of the Islamic Financial Engineering Products

Abstract

Financial Derivatives are regards as the most important products of financial
engineering and the most important financial inventions and innovations reached
by the centers of research and development. Derivatives are financial
instruments its value linked with certain financial tool or any index or good
which help to buy and sell financial risks in the financial markets. The option
contracts, future contracts, future and swap contracts are the most important
types of financial derivatives and the most current traded in the financial
markets. But the dealing by these tools in terms of legitimacy is not permissible
because they contradict mildly with the Sharia, and they involve suspicious
transactions of bribery and gambling. However, there are legitimate alternatives,
which are proved to be efficient, and which can replace these derivatives, like
contract of peace, the rent contract, the deferred sale, and option condition.